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Rains lift chance of Brazil boosting world crop glut

As if expectations for world soybean supplies were not already high enough, rains in Brazil have only extended the round of benign conditions boosting world production prospects.

Farmers will on Monday can, officially begin planting their 2014-15 soybean crop, after period when regulations state fields must be kept soybean free, to stem the spread of rust.

In fact, they may have already jumped the gun.

"The way it works is that farmers are not allowed a 'live' soybean plant in the ground before September 15, so you can argue that a seed does not count," Michael Cordonnier, the influential crop scout, and South America expert, said.

And they are being encouraged to an early start by a timely end to the dry season, with Dr Cordonnier noting "pretty good rains", especially in the south of Mato Grosso, the top growing state, and northern Mato Grosso do Sul.

"Some years, farmers have to sit tight waiting for rain. But this year it looks like they will get off to an early start."

And that has all sorts of, positive, implications for crop supplies.

'

Leapfrogging other'

One is that "with an early start, farmers are likely to plant more soybeans," taking in more land which had either been allocated to later sown crops, or expected to be overlooked altogether.

Array

Lanworth: 98.0m tonnes

Safras: 95.9m tonnes

AgroConsult: 95.1m tonnes

Conab: 94.86m tonnes

USDA: 94.0m tonnes

Michael Cordonnier: 93.5m tonnes

FCStone: 93.0m tonnes

IGC: 91.0m tonnes

Furthermore, an early start "means farms will be able to keep ahead of soybean rust and insect pests" which tend to grow as a threat as the season proceeds.

That implies large plantings and strong yields, supporting a round of buoyant forecasts for Brazil's soybean harvest.

"Everyone seems to be leapfrogging other each other to raise their forecasts," Dr Cordonnier told Agrimoney.com.

Extra plantings

On Thursday, the US Department of Agriculture lifted its estimate by 3.0m tonnes to a record 94.0m tonnes, reflecting a 1.0m-hectare increase in the forecast for plantings.

That made the USDA more generous than Dr Cordonnier, whose own estimate it at 93.5m tonnes, although less upbeat than AgroConsult, which foresees a 95.1m-tonne crop, and Lanworth, which has a 98.0m-tonne figure.

"Economic returns set likely soybean plantings at 31.1m hectares," a gain of 3% year on year, Lanworth said.

Corn effects

And there are further implications of a strong early pace to soybean plantings.Array

Lanworth: 79.0m tonnes

Safras: 77.75m tonnes

FC Stone: 76.84m tonnes

USDA: 75.0m tonnes

Conab: 71.8m-74.9m tonnes

Includes output from main and safrinha harvests

"Last time, Brazil got away only about 30,000 tonnes by the end of January. It could be a lot more in 2015," Dr Cordonnier said.

A quick pick-up to export supplies would be especially likely if farmers opt more for early-maturing varieties, as the USDA expects.

"Early planting, especially in Mato Grosso, aids farmers who want to plant early maturing soybean varieties and follow their harvest with corn or cotton as a second crop," the department said on Thursday.

"About 60%of the 8.6m hectares in Mato Grosso were planted using early-maturing soybean varieties last year and the percentage is expected to increase this year."

Furthermore, an early harvest means an early start to sowings for the second, or safrinha, crops, typically corn, on land vacated by the soybean harvest.

"If you can get the safrinha crop in early, you are looking at a much better chance of getting a good yield," Dr Cordonnier said, acknowledging that he had become significantly more upbeat on prospects for safrinha corn.

Financial pressures

But strong crop ideas of course look likely only to put further pressure on prices which are already leaving farmers in many countries looking at meagre profits, if any.

"Lower corn prices and as-of-yet uncertain timing of the soybean harvest set a wide range for potential second crop corn plantings," said Lanworth, although pencilling in a second crop corn area of 9.6m hectares, up 5% year on year, and equivalent to following on from 30% of soybean acres.

Indeed, "competition from sugar cane and minor crops will limit expansion" even for soybeans.

Dr Cordonnier said that soybeans, usually a more profitable crop for Brazilian growers, prices were approaching levels which in some areas questioned the chances of positive returns.

"You can still make money in southern Brazil with soybeans. But it is getting precarious in central Brazil," further from port, where the extra money needed to transport crop for export eats significantly into margins.

Quantity vs price

One hope for growers is that strong yields – made more likely by the prospect of a weak El Nino, which typically brings ample rain to southern Brazil – will help make up for the lower prices.

But of course strong Brazilian production is not what farmers in the northern hemisphere might be hoping for, as they jiggle with their spreadsheets ahead of spring planting, or hope for higher prices for selling what they already have in the barn.